The law firm said the sharp rise in the amount of underpaid tax was driven by “increased scrutiny” of how large corporations allocate their costs and income between different countries.
HMRC reportedly suspects that some businesses undertake this process in a “way that deliberately and artificially reduces their taxable profits in the UK”.
The amount of tax it estimates could be underpaid through transfer pricing arrangements and thin capitalisation has soared to £10.4bn, up from £6bn a year ago. Thin capitalisation refers to a process where interest payments from one part of a group of companies to another can be used to reduce profits in the UK.
Jason Collins, head of tax at Pinsent Masons, said: “This is a dramatic increase in the amount of big business tax that HMRC fears is being underpaid.
“It is an above trend jump and something that corporates should be concerned about. HMRC’s Large Business Directorate have a particularly good record in this area, collecting between 40% and half of all the underpaid tax they identify. Sometimes they do that through negotiation but other times it is full scale investigations and litigation all the way through the courts.”
He added: “During the lockdown HMRC have been as helpful as they can with companies over tax bills and outstanding debts but that doesn’t extend to tax avoidance and tax evasion. As sure as night follows day, a slump in tax revenues is going to be followed by a more active agenda of tax investigations.”
“HMRC follows the money so it will focus its efforts on those areas where it fears most tax is it risk.”
In the last year alone, the Large Business Directorate collected an extra £13.2bn in tax from investigations and other compliance work focused on a group of the 2,000 largest businesses.
That equates to around 44% of the amount tax that HMRC suspected might have been underpaid by corporates at the start of that year.